SG/di 948.1
12 de julio de 2010
E.
THE ANDEAN TRADE PREFERENCES AND DRUG
ERADICATION ACT: ECONOMIC IMPACT IN THE UNITED
STATES AND THE ANDEAN COUNTRIES
THE ANDEAN TRADE PREFERENCES AND DRUG ERADICATION ACT:
ECONOMIC IMPACT IN THE UNITED STATES AND THE ANDEAN
COUNTRIES1
INTRODUCTION
The United States International Trade Commission (USITC) has extended an invitation
to the General Secretariat of the Andean Community, to attend the public hearing
related to the 14th report of the Commission on the economic impacts of the Andean
Trade Preference Act (ATPA), which must be submitted to the Congress of the United
States.
The USITC is particularly interested in information on (1) the recent effect of the Andean
Trade Preference Act (ATPA) on the overall economy of the United States as well as on
specific national industries which produce goods, that are similar or directly competitive,
of important goods through the ATPA beneficiary countries, (2) the likely impact on the
future that would cause the ATPA on the U.S. economy in general and on such domestic
industries, and (3) the estimated effect of the ATPA on coca crop eradication and the
efforts of crop substitution of the beneficiary countries.
The General Secretariat of the Andean Community, with contributions made by Member
Countries, has prepared this document in response to the invitation made by the USITC.
The paper focuses on several elements: first, the description of some facts of
importance related to trade between the United States (U.S.) and countries benefiting
from ATPA/ATPDEA during the 2007-20092 period, showing bilateral trade performance
and the positive effects on the economic and trends, that indicate a complementary
trade relationship between them.
Secondly, it summarizes in a general way, trade trends that indicate that following the
enactment and use of the preferences, there is a relationship of complementarity
between the Andean economies and the United States. In a third section, the efforts
being made within the framework of the Andean Community in prevention, fighting
against trafficking, and eradication and substitution of illicit drug crops are ourlined.
Finally, as a conclusion, some general ideas about the effects of the extension of the
validity of the Andean Preferential Tariff are presented.
II.TRADE BETWEEN THE UNITED STATES AND THE BENEFICIARY COUNTRIES
OF THE ANDEAN TRADE PREFERENCE ACT(ATPA/ATPDEA)
The United States is the main trading partner of the Andean Community, formed by
Bolivia, Colombia, Ecuador and Peru. According to the USITC numbers, in 2008 the
Andean exports to the United States (USA) reached a record number of USD 30.029
million, of which USD 13.778 million were sold through the ATPDEA. In terms of global
trade in the Andean Community, these numbers indicate that 30.3% of total exports of
the Andean Community (CAN) came to this country. From the side of imports a similar
situation occurs, the United States is the main supplier of foreign purchases of the
11
Paper prepared as a contribution from the General Secretariat of the Andean Community, to the report of the USITC, for the
Congress of the United States on the economic impacts of the Andean Trade Preferences Act–ATPA.
2
It should be noted that during this period, the implementation of preferences ATPA / ATPDEA was not uniform in the Andean
region. Peru signed a free trade agreement with the United States and preferences were not renewed to Bolivia, one of the members
of the CAN.
-2-
Andean countries; in 2008, the Andean imports from that country reached a record
number of $ 20.717 million, representing 22.0% of total Andean imports.
These unprecedented levels in the flow of trade between the U.S. and the Andean
Community, were reduced for 2009, mainly due to the international economic crisis,
which occurred in the Andean region almost immediately, through the retail channel by
reducing the demand for industrialized countries Andean export supply.
Thus, the Andean countries' exports to the United States reached USD 22.420 million
and imports from that country by the Andean countries reached U.S. $ 17.612 million in
that year, representing in the case of exports, 28% of total exports to the world and
imports, 23% of the total purchased to the world.
The economies of the Andean countries are characterized by being small, open
economies, from which it follows that their economic growth depends largely on the
development of exports. As shown in the graphs below, the focus of economic growth
based on trade liberalization implemented by the Andean countries to the year 2008,
which enabled them to lead the economic growth in Latin America, was affected by the
international crisis, as immediate evidence was reflected in the reduction of the exports,
thereby affecting the aggregate demand.
Graph 1. Andean Community - Aggregate Demand Growth 2007- 2009
Quarterly growth (T / T-4)
Source: Central banks of the Andean countries.
In the same way, the reduced demand for U.S. imports, undoubtedly affected the whole
world; however, according to information from the Bureau of Economic Analysis, the
Andean countries have been most affected since the U.S. imports from these countries
are further restricted, as shown in the following graph.
-3-
Gráfico 2. U.S.: Reduced Global Demand of Imports
- 2009/2008 variation by country/region of origin -
Fuente: Bureau of Economic Analysis
These numbers show the relevance of the U.S. market, which as the main destination of
Andean exports, has allowed generating exports that have boosted the Andean
economies, which showed growth in GDP above the average for Latin America in the
pre- crisis.
The following chart shows the relevance of trade with the United States in 2009 for the
Andean countries, when 28.4% of total Andean exports to the world, went to that
country; by contrast, there is the low representation of the Andean supply exports in the
total imports by the U.S., where the CAN provides just 1.4% of all U.S. imports by the
year 2009.
Chart 3. Trade Partnership CAN – U.S.
35%
30%
Andean Com unity
ATPA / ATPDEA
28.4%
25%
20%
15%
8.2%
10%
5%
1.4%
0.4%
0%
U.S Imports from CAN / Total
U.S Imports
CAN Exports to U.S / Total
CAN Exports
As indicated, the total imports of the United States from ATPDEA beneficiary countries,
account for only a little over 1.0% of its total imports for 2009, so it can be said that they
do not constitute a threat to the productive activity of the U.S. economy in general. The
following chart, which separates information by sector, concluded that in any economic
sector, imports conducted by the U.S. from Andean countries under the ATPDEA, could
cause damage to the economy of this country.
-4-
Chart 1. U.S.: Imports from Beneficiary Countries (ATPDEA) by NAICS3
(USD thousands)
NAIC´s based U.S. Import Sector
USA: Value of Imports from ATPDEA
Beneficiary Countries
2008
2009
USA: Value of Imports from the
WORLD 2009
Value
Percent of Total
(%)
3,169,038
3,291,052
36,796,475
8.9
14,946,567
9,638,985
183,066,597
5.3
2,188,426
1,857,992
161,483,992
1.2
Wood, Paper, Plastic, Chemicals,
Non Metal Products
2,664,821
1,726,662
301,971,758
0.6
33
Metal Manufacturing, Machinery,
Computer, Transportation
equipment
3,926,514
3,299,665
796,397,778
0.4
51
Information
11
Agriculture and Livestock Products
21
Oil, Gas, Mineral and Ores
31
Food, Textile, Apparel and Leather
Manufacturing
32
91-99
Special Provissions
Total
4
6
32,893
0.0
1,047,213
875,513
69,413,991
1.3
27,942,583
20,689,875
1,549,163,484
1.3
Source: USITC
With regard to a potential threat to American jobs, due imports under the ATPDEA, it is
worth noticing that there is not complete information on U.S. employment directly
associated with the Andean Trade Preference Act, however, there is partial information
that reveals the creation of direct and indirect jobs due to the ATPDEA in the United
States.
It is estimated that U.S. floriculture activity, based mainly on imports under preferential
fresh flowers from the Andean countries, has contributed to the creation of about
226,000 direct and indirect jobs in the United States, in areas related to transportation
companies, flower shops and supermarkets, among others4. In the same way, according
to the Association of Food Industries, which groups over 200 companies, food industry
has been able to create approximately 5,000 new jobs only in the chain distribution of
imported asparagus from Peru under the Andean Trade Preferences.(5).
A longer-range view of trade relations between the Andean countries and the United
States indicates, that they have strengthened since the original Andean Trade
Preference Act (ATPA) of 1991 and its extension in August 2002 under the ATPDEA5 for
Bolivia, Colombia, Ecuador and Peru.
The first Act granted preferential access to U.S. market to 5,600 products for ten years,
with the purpose of promoting exports of beneficiary countries and thus, enable them to
have better commercial alternatives to illicit drug crops. This would allow their
eradication by migrating to other crops or other industry sectors, which in turn, would
generate a positive social and economic impact on particularly vulnerable populations to
drug trafficking and drug production.
It is worth pointing out that currently, the ATPDEA is not uniformly applied among the
Andean countries. Peru, completed the signing of an FTA with the United States, which
is currently in effect, which allowed in some cases, consolidating, and in others,
improving the access of their exports to the United States and make permanent the
preferences. In the case of Bolivia, by decision of the Executive of the United States,
NAICS corresponds to the Industrial Classification System used by federal agencies of North America.
USITC, 200
5 Levin 2006, quoted by ECLAC 2007.
3
4
-5-
preferences under ATPDEA were suspended in late 2008. In the case of Colombia and
Ecuador, preferences are still used mostly for trade with the United States but depend
on the decision of the executive, its periodical renewal.
Between 2000 and 2003 the United States imports from the Andean countries benefit
from the ATPDEA remained relatively stable; between 2004 and 2008 there was an
accelerated growth as a result of improvements in access to the U.S. market, despite
falling in 2009 as a result of the international crisis (Graph 4). This confirms that in
general terms, the tariff preferences granted by the ATPDEA have generated a
substantial increase in exports from the Andean countries to the U.S., both for the whole
of the Andean Community and for individual countries (Graph 5).
Gráfico 4. U.S. Imports from Andean Countries
35,000
Bolivia
Colombia
Ecuador
Perú
Millions of dollars
30,000
25,000
20,000
15,000
10,000
5,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: USITC
The products that showed greater increases were mainly raw materials, especially
minerals and manufactures based on natural products such as fuel and textiles and
clothing.
Chart 5. U.S. Imports from Andean Countries under ATPA and ATPDEA
16,000
Bolivia
Colombia
Ecuador
Perú
14,000
Millions of dollars
12,000
10,000
8,000
6,000
4,000
2,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source: USITC
In analyzing the relevance of the ATPDEA in the economies that have benefited from
this system of preferences, it proves that in 2009, it represents on average, 28.7% of
-6-
exports from the Andean Community, which shows a significant sensitivity of these
countries to this preference scheme.
The numbers of 2009, contrast significantly with the ones recorded in 2007, when
exports under ATPDEA accounted for about 50.4%. The explanation for this fall lies
among others, by the exclusion of Bolivia of the scheme since 2008. In 2009 in
particular, preferences under the ATPDEA system represented a significant proportion
of total exports of each country, in a greater degree to Ecuador and Peru (48.4% and
30.7% respectively).
Chart 2. Andean Exports to U.S., and Preferential Program ATPDEA (2009)
Countries
Comunidad
Andina
Bolivia
Colombia
Ecuador
Perú
US / Mundo ATPDEA / US
28.4%
28.7%
7.5%
39.1%
33.2%
16.6%
0.0%
22.1%
48.4%
30.7%
Source: USITC
Although preferential access to U.S. market can also be obtained through the
Generalized System of Preferences (GSP) as part of the concessions made at UNCTAD
for developing countries, these preferences are less used because of the limited product
coverage (for example, textiles, clothing and canned tuna are excluded), and the
eligibility criteria and rules of origin are stricter, though they cover some products that
are not covered by the Andean preferences.
In terms of products, in 2009, the Andean exports to the U.S. market mainly focused on:
oil and mining (56.3%), flowers and agricultural products (14.4%), textiles and clothing
(5.8%), nickel, copper cathodes aluminum (3.5%). On the other side, the main imports
from ATPA beneficiary countries from the U.S. articles were: heavy manufacture (about
75%) in which predominates: machinery and equipment and transportation material
(41%), chemical products, rubber and plastic (28%) and other manufactures (almost
6%), therefore, the main items are mainly capital goods and raw materials.
-7-
Chart 3. Andean Exports to U.S. under Preferential Program
Country
Import Program
Extended
Special
Import
Program
2007
153
0.7%
146
0.5%
0
0.0%
111
0.5%
58
0.2%
0
0.0%
43
43
180
0.2%
0.2%
0.8%
88
49
331
0.3%
0.2%
1.1%
0
126
396
0.0%
0.6%
1.8%
377
3,737
1.7%
16.7%
526
5,275
1.8%
17.6%
523
2,831
2.3%
12.6%
2,286
10.2%
4,121
13.7%
1,894
8.4%
1,451
253
6,043
6.5%
1.1%
26.9%
1,154
254
8,303
3.8%
0.8%
27.7%
937
206
8,838
4.2%
0.9%
39.4%
10,034
4,341
44.7%
19.3%
13,832
5,185
46.1%
17.3%
11,875
2,177
53.0%
9.7%
3,184
14.2%
4,706
15.7%
1,850
8.3%
1,157
86
2,113
5.2%
0.4%
9.4%
479
66
4,282
1.6%
0.2%
14.3%
327
59
3,373
1.5%
0.3%
15.0%
6,540
3,080
29.1%
13.7%
9,533
3,172
31.7%
10.6%
5,610
1,326
25.0%
5.9%
1,674
7.5%
1,646
5.5%
628
2.8%
1,405
266
2,143
0
6.3%
1.2%
9.6%
0.0%
1,526
294
2,671
0
5.1%
1.0%
8.9%
0.0%
698
33
1,983
1,070
3.1%
0.1%
8.8%
4.8%
5,489
11,311
24.5%
50.4%
6,138
13,778
20.4%
45.9%
4,412
6,334
19.7%
28.3%
7,255
32.3%
10,531
35.1%
4,372
19.5%
4,056
649
10,480
0
18.1%
2.9%
46.7%
0.0%
3,247
663
15,587
0
10.8%
2.2%
51.9%
0.0%
1,962
425
14,591
1,070
8.8%
1.9%
65.1%
4.8%
22,439
100.0%
30,029
100.0%
22,420
100.0%
ATPA (no
ATPDEA)
ATPDEA
GSP
No program claimed
Total Bolivia
ATPA / ATPDEA
ATPA (no
ATPDEA)
ATPDEA
Colombia
GSP
No program claimed
Total Colombia
ATPA / ATPDEA
ATPA (no
ATPDEA)
ATPDEA
Ecuador
GSP
No program claimed
Total Ecuador
ATPA / ATPDEA
ATPA (no
ATPDEA)
ATPDEA
Perú
GSP
No program claimed
Peru-U.S.
Total Perú
ATPA / ATPDEA
ATPA (no
ATPDEA)
ATPDEA
Total
GSP
No program claimed
Peru-U.S.
Total ATPA Countries
2009
In million dollars
ATPA / ATPDEA
Bolivia
2008
Sources: US International Trade Comission - and the U.S. Departament of Commerce
Chart 4. Main U.S Imports under ATPDEA, 2009
Bolivia
Colombia
Ecuador
Perú
CAN
Petroleum oils and derivatives
0.00%
26.19%
26.84%
3.24%
56.28%
Flowers
0.00%
9.43%
2.40%
0.01%
11.84%
Textil and apparel products
0.00%
0.96%
0.01%
4.82%
5.79%
Refined copper cathodes
0.00%
0.05%
0.00%
3.45%
3.50%
Naphthas
0.00%
0.00%
1.06%
1.01%
2.07%
Asparagus
0.00%
0.00%
0.01%
0.92%
0.93%
Canned tuna
0.00%
0.00%
0.69%
0.00%
0.69%
Guavas
0.00%
0.00%
0.31%
0.32%
0.63%
Glazed ceramic flags and paving
0.00%
0.39%
0.04%
0.09%
0.52%
Artichokes
0.00%
0.00%
0.04%
0.47%
0.51%
Grapes
0.00%
0.00%
0.00%
0.49%
0.49%
Others
0.00%
7.67%
2.97%
6.10%
16.74%
Source: USITC
Table 3 presents the main lines of the U.S. imports from beneficiary countries of the
ATPA / ATPDEA covered by these preferences. In the same way, Charts 4 and 6 show
the composition of the main products exported by the Andean countries in 2009,
considering, respectively, imports of oil and oil products without taking them into
consideration.
-8-
Graph 6. Main Non Oil U.S Imports from Andean Countries under ATPDEA, 2009
Textil and
apparel
products,
14.0%
Refined
copper
cathodes,
8.5%
Asparagus,
2.3%
Canned tuna,
1.7%
Guavas, 1.5%
Glazed
ceramic flags
and paving,
1.3%
Artichokes,
1.2%
Grapes, 1.2%
Vegetables,
1.2%
Flowers,
28.7%
Others,
38.4%
Source: USITC
According to the information from the Government of Bolivia, the suspension of tariff
preferences under the ATPDEA program, has caused a relevant impact to the Andean
country with the lowest per capita income in South America. Indeed, the United States
constitute the third largest destination of Bolivian exports after Brazil and Japan (where it
mainly exports natural gas and minerals), so that the suspension of preferences under
ATPDEA has affected thousands of workers in the exporting regions of the preferential
goods, mainly textiles and leather. Before the suspension of ATPDEA for Bolivia by the
end of 2008, exports to the U.S. reached USD 153 million in 2007, and USD 145 million
in 2008. According to the Bolivia’s Government’s estimate, the employment generated
by exports to the U.S. under the ATPDEA program were 19,300 jobs, mostly for the
manufacturing of textiles and clothing industries. With the suspension of ATPDEA,
product diversification fell from 210 in 2008 to only 98 in 2009, and the number of
companies that had the U.S. as their market, went from 57 to 49, 85% of which are small
and medium enterprises.
For Colombia, this Government informs that through the ATPA / ATPDEA preferences,
more than 1,000 products enter the U.S. market without paying tariffs and through less
restrictive rules of origin that apply to the General System of Preferences tariff (GSP),
equivalent to 92% of Colombia's exports to that country.
Of the total exports from Colombia to the United States in 2008, 56.2% of the total was
exported through the ATPDEA benefits, which meant an increase of 62.1% over the
previous year. In the period January to April 2010, exports through ATPA / ATPDEA
were $ 3,120 million, 113.7% higher than the same period of 2009. Likewise, in the
same period, exports accounted for 62% of total exports to the U.S. by Colombia, higher
than the same period in 2009, when it was 45%.
Products exported from Colombia that grew most in the period, were oil 153.9%, 430.4%
textiles, leather and leather articles 21.5%, while clothing fell by -1%.
In the case of Ecuador, information from that Government indicates that in 2009, 81% of
total oil and non-oil Ecuadorian exports entered the U.S. market with zero duty, either
under the ATPDEA regimes and / or GSP (Generalized System of Preferences), or the
application of Most Favored Nation principle (MFN) of the WTO, zero tariff. In 2008, this
percentage was 87%.
-9-
Within the Ecuadorian exportable offer, the main lines benefited from the ATPDEA have
been those based on natural resources with medium degree of industrialization and
value added such as roses and other fresh flowers (17%), packed tuna (17 %), broccoli
(7%), plywood (5%) and other products the remaining 36%.
According to estimates made by Ecuador, the possibility that preferences are not
renewed through the ATPDEA program would entail a reduction of 52% of total exports
to the U.S. If the non-oil exports are analyzed, the loss of trade would be 19%, taking
into account that the producers benefit from the preferential tariff treatment are formal
and small and medium size producer, who trade with large and medium trading
companies.
From what has been outlined above, it is shown how since the adoption and
implementation of the original ATPA in 1991 and the adoption and use of the ATPDEA in
2002, to date, positive impacts on beneficiary countries have been reported and
retractions, where implementation has been suspended. In economic terms, preferences
are an important tool to access one of the largest markets in the world and, as it has
already described, a priority market in the global trade of the Andean countries. From
this, several positive effects follow, such as:
a) Employment generation and improvement in the formal structure of employment in
Andean countries6.
The favorable impact of the validity of the ATPDEA in employment levels in the
Andean countries, has been brought out in various documents prepared by national
and international agencies, including the United States (Andean Community, 2004,
USITC 2005, USITC 2006). To quote some relevant data, there is the case of Bolivia,
where the beneficiaries (direct and indirect) of the validity of the ATPDEA reached
80,000. In the case of Colombia, the estimates are close to 1'000 000 jobs7. In the
case of Ecuador, the number is 500,000 jobs, including fishing sector, industry, flowers
and textiles8. In the case of Peru, the number is over 800,000 jobs.
In general, in the Andean region, beneficiaries are close to the 5.8% of the
Economically Active Population (PEA), about 2'300.000 people. It is worth noticing that
in large proportion, the employment generated through the ATPDEA, is staffed by
women, who got better conditions, characterized by a formal and stable employment in
sectors such as textiles and the cultivation of flowers, items benefit from tariff
preferences.
It is worth stressing for the Bolivian case, that economic activities such as textiles,
leather and wood, dependent on a large proportion of exports and therefore the main
beneficiaries of the ATPDEA, have been affected by the suspension of the
implementation of the Program since 2008. Only in the area of La Paz, about 5,0009
companies characterized by being small and medium have been affected. Numbers
reported by the National Chamber of Exporters of Bolivia - CANEB indicate that due to
the suspension of preferences, the level of employment in the textile manufacturing
sectors of cotton and other fibers has fallen by 30%.
For the case of Ecuador, there are products exported under the ATPDEA, especially
from the agricultural sector, involving a large group of small producers, particularly
associated with the broccoli, asparagus, mangoes, pineapple, banana pulp, raw sugar
cane, mixed vegetables, fruit pulps, products exported to the U.S. under ATPDEA. The
Certain references in this paragraph are from ECLAC, 2006.
USITC, 2006
8 OAS, 2006 and USITC, 2006. Only in the flower sector 10 000 are employed.
9 IBCE, 2006 and USITC, 2006
6
7
- 10 -
possibility that these small producers work through formal marketing schemes with
large or medium-sized exporting companies, has contributed to employment
generation in areas such as Cotopaxi, Chimborazo, Tungurahua, Bolivar and
Pichincha, provinces that in some cases that have significant poverty rates.
Chart 5
The information collected in Chart 5, based on U.S. Commerce Department
information, shows that by 2006 the number of jobs at risk at a non-extension of tariff
preferences were 2.3 million, which could be multiplied by three if considering that
employees have family members who support them.
b) A second effect of the use of the tariff preferences under analysis, is the increase in
the GDP of each beneficiary country with an increase in its consumption capacity of
domestic and imported goods, thanks to the growth in revenues from exports under
ATPDEA.
There is a larger participation, direct and indirect, of small and medium enterprises in
industrial processing chains that produce goods beneficiary of ATPDEA in the Andean
countries, acting as suppliers of inputs for larger exporters. From this, that ATPDEA
benefits extends in large part to all chains of productive integration of the beneficiary
countries.
In the study carried out by ECLAC (2006), there is empirical evidence developed
through a computable general balance model, of the improvement in welfare
experienced in the population of the Andean countries due to the validity of the
ATPDEA. These welfare gains are estimated at 0.2% of GDP, reaching a value of USD
239 million. In another study, carried out in Bolivia in 2008, the welfare loss due to the
suspension of ATPDEA program for that country, has led to a loss of welfare of its
population of 0.3% of GDP10.
At this point it is worth rescuing what has been noted above, in respect of the growth
model of the Andean countries, characterized by having small and open economies,
where trade liberalization has been one of the factors of growth and economic
development. In this regard, the United States play an important role since it is the
10
Telleria, R; Ludena, C; Shankar, B and Bennet, R, 2008.
- 11 -
destination of about one third of the Andean export supply and the supplier of about
one fifth of global imports made by this regional group.
c) The ATPDA has contributed to keep the demand for imported goods produced by
U.S. producers located in the Andean region, from raw materials and capital goods to
consumer goods, in view of the increase of their capacity to demand.
This is the case of the Andean textile industry, which has benefited from the tariff
preferences through the ATPDEA. This industrial sector covers the bulk of employment
in the industry for being labor-intensive (mainly women) and has the additional feature
of being formed mainly by small and medium enterprises, including family enterprises,
which is important since it generates formal and quality employment, and allows to
contribute to the better distribution of income through the inclusion in the exporting
area of a large percentage of the population.
The Andean textile industry exported to the world USD 4.361 million in 2008 and $
3.018 million in 2009. From these values, 26% was destined for the U.S. market in
2008 (USD 1.137 million) and 27% in 2009 (USD 813 million), which shows the high
dependence of this labor, to the demand for textile goods of North American
market. What is relevant in this case, is that this industry uses supplies, raw materials
and capital goods from the United States for their development, including the American
cotton. Of total world imports made by the Andean countries in 2009 for cotton (USD
225 million), 85% come from U.S. (USD 191 million) in 2008 and that percentage for
2009 was 91%.
Of total world imports of cotton made by the Andean countries in 2009 (USD 225
million), 85% came from U.S. (USD 191 million) in 2008 and that percentage for 2009
was 91%. At the same textile industry, an important supply is polymers of ethylene, in
this case 60% of world imports of this category by the Andean countries comes from
U.S. (USD 590 million in 2008 and USD 418 million in 2009).
In the case of agricultural products, much of the exports have the U.S. as destination,
also benefit from the ATPDEA. Supplies used on crops are mineral or chemical
fertilizers. 64.2% of global imports made by the Andean countries comes from the U.S.
(USD 275 million in 2008 and USD 133 million in 2009).
d) Increased employment opportunities and better working conditions, which have
created welfare conditions that lead to a greater percentage of working population
without intending to migrate for better prospects.
On this particular item, is worth reminding the study of Central Bank of Ecuador in
2007, which stated that in the event of failure to extend the ATPDEA preferences, such
as in the case of the production and export of broccoli, a 2,500 jobs per year reduction
would be estimated, a 900 ha / year reduction in sown area, and a USD 1.5 million /
year reduction of exports. In the case of pineapple, the implications would be 264 jobs
/ year, USD 1.4 million of reduction investments per year, reducing sowing areas on
432 ha / year and USD 1.3 million / year reduced exports, and finally, in the case of
flowers impacts would be 5,190 jobs per year, USD 65 million / year reducing
investment, a 432 ha / year decrease in sown area in and USD 27.3 million / year
decrease of exports.
In the case of Bolivia, it has already been outlined how the employment generated by
exports to the United States which could enter at zero duty, thanks to the ATPDEA,
generated 19,300 jobs, which have been endangered due to the suspension of
preferences since 2008.
- 12 -
III. TRADE COMPLEMENTARITY BETWEEN THE ANDEAN COUNTRIES AND THE
UNITED STATES
Generally, under the ATPDEA it is allowed to have a cumulative origin of products from
beneficiary countries, as well as from the United States and Caribbean countries, Puerto
Rico and Virgin Islands. The ability to generate added value at the sub region’s level
towards the use of ATPDEA has had effects such as:
a) The deepening of economic integration objectives of the Andean Community
through the development of links between industrial production chains of the
countries benefiting from the preferences. This, thanks to the existing trading
scheme within the Andean Community, and to the possibility offered by the
ATPDEA that native raw material from any beneficiary country could qualify for
preferential tariff treatment in the United States.
b) Greater complementarity between the economies of the United States and the
Andean countries, due to the trade characteristics between them. Most Andean
productive sectors, with important export volumes to the U.S. demand raw
materials, machinery and capital goods from this country.
c) The development of greater economies of scale in the region, which have
enabled to diversify markets for Andean countries, with the export of products
using raw materials and capital goods from the United States. In the next chart
this statement is exemplified by the analysis of the trade of four goods produced
in the region. In these products there has been an increase in overall Andean
exports, although the proportion of exports to the U.S. market has reduced. As in
the production of these goods are used supplies and machinery from the U.S. to
comply with the rules of origin, an increase in sold quantities of these products,
indirectly benefits that country, which indirectly captures a market for their capital
goods.
Chart 6
Cod. Prod.
Products
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
03061391 Shrimp, frozen
40.2%
46.7%
48.4%
52.7%
45.7%
42.4%
41.2%
41.1%
34.3%
36.1%
06031100 Roses, fresh
80.6%
77.0%
78.5%
73.9%
97.5%
77.6%
57.9%
68.7%
78.9%
58.8%
T-shirt and other vests, knitted
61091000
or crocheted, of cotton
79.7%
73.5%
76.3%
80.6%
80.6%
77.9%
57.8%
63.2%
61.5%
68.4%
71069110 Silver unwrought, not alloyed
10.5%
11.2%
19.7%
39.8%
40.0%
57.3%
52.5%
56.2%
50.3%
47.3%
d) Although the ATPDEA has helped to promote the diversification of exports from
the Andean countries, the main exports are still concentrated in few products.
Though local industries has been strengthened and it enabled to generate
employment in important economic sectors, it does not constitute a potential
threat to U.S. industry.
- 13 -
Chart 7
Andean Exports
to USA
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
N° Products
2,450
2,557
2,700
2,751
2,910
2,950
2,833
2,818
2,717
2,751
% Andean Exports
to US of 20 main
products
81.7%
75.6%
74.9%
75.4%
74.7%
78.3%
79.4%
79.2%
82.5%
81.9%
% Andean Exports
to US of 50 main
products
89.3%
85.3%
85.3%
85.3%
84.6%
87.0%
88.1%
88.4%
90.1%
89.3%
In 2009, the Andean exports of 20 products accounted for 82% of total exports
and 50 products reached 89.3%. Therefore, the number of potentially competing
industries with the production of the United States is practically nonexistent. An
additional element that emerges from the analysis, is that the use of the ATPDEA
is still not very large, this leads to the conclusion that increased investment would
help to make the most of the conditions of preferences, to the extent that the
conditions would be maintained and some security would be granted to economic
agents over the course of trade in these products in the near future.
e) The diversification of supply to U.S. consumers. The Andean products who have
the ATPDEA offer alternatives to the American consumer in terms of product
quality and reduced prices, contributing to improve welfare conditions for U.S.
consumers. While Bolivia was the beneficiary of the ATPDEA, in 2007, about
USD 2.2 million were exported from this country in clothing and textiles as camel
fibers, cotton and leather; after the suspension of the preferences, only $ 300
thousand have been exported, a significant result in a smaller supply of quality
products for American consumers.
f) Maintaining the direct and indirect employment in the United States generated by
the demand for American goods and lower prices of imported goods. Some
sectorial information indicates that thousands of jobs have been created in the
United States, due to the national distribution of goods like flowers, which are
imported mainly from Colombia and Ecuador, under the ATPDEA preferences
(USITC, 2006).
In addition, the ATPDEA has favored that the final consumers of U.S. households
obtain quality products that contribute to their welfare at lower prices. The United
States is a market for large quantities of consumption and low prices and the
application of tariffs for Andean products entail an increase in the domestic cost
of imported product in the U.S. market, at the first importer and wholesaler, and
could affect competitive conditions.
It should be also remarked that the depreciation the dollar is experiencing
worldwide, causes the products supplied by the Andean region to be more
expensive, generating declination in the competitive conditions to enter the U.S.
market.
- 14 -
III. ANDEAN COMMUNITY'S EFFORTS IN CRIME PREVENTION, TRAFFIC AND
ERADICATION AND DRUG CROP SUBSTITUTION.
The Member Countries of the Andean Community (CAN) and beneficiaries of the
Andean Trade Preference and Drug Eradication Act (ATPDEA): Bolivia, Colombia,
Ecuador and Peru, are aware of the complexity of the fight against the world drug
problem, aggravated by increased levels of external demand and the complex supply
control.
In this regard, the Andean countries have ratified in various ways their commitment to
facing up to the world drug problem, considering the principles of shared responsibility,
free of conditionings and respect for human rights, which requires an integrated and
balanced management of both, supply control and, the reduction on the demand of illicit
drugs.
The responsibility they have taken on the fight against this scourge, which has
represented the cost in lives, physical and financial resources, besides generating
governance problems and corruption, have made them more aware of the complexity
and nature of the problem, and that its solution requires a long process of institutional
strengthening, generation of solidarity, trust and social responsibility; in addition to being
aware that due to its magnitude, they can not face it alone and advocate for a real and
concrete implementation of the principle of hemispheric and global shared responsibility.
Efforts in this process, both national and as a regional group, have been reflected in
various fields. It is worth noting their active participation in the development and
implementation, in the United Nations framework, of the Political Declaration and Action
Plan on International Cooperation for a comprehensive and balanced strategy against
the global problem of drugs in March 2009; and the new Hemispheric Drug Strategy,
adopted by the OAS General Assembly on June 8, 2010, in Lima, with which opened a
new phase of regional cooperation in how to face the global problem of drugs.
This is complemented by the participation in the Multilateral Evaluation Mechanism
(MEM) of CICAD/OAS which has initiated in an era of unprecedented cooperation and
transparency. The MEM allows to face clearly the challenges and problems of the
hemisphere and assure the move in the right direction.
At the subregional level, worth mentioning the Andean communitarian actions that have
been boosting for over a decade, to face in a balanced way the effects of the drug traffic,
understanding the importance of generating possibilities to replace the illegal activities of
production and including the development of measures that discourage the increase
demand in the region and beyond it.
This attitude reflects the general framework of Decision 458 (1999) "Common Foreign
Policy Guidelines" which stipulates, inter alia, to articulate joint positions to contribute to
the international fight against the world drug problem, and Decision 505 (2001), which
establishes the "Andean Cooperation Plan for the Control of Illegal Drugs and Related
Offenses."
In the Andean Community there is a deliberate effort to increase, significantly, the
seizure of both cocaine and chemical supplies diverted to the production of that drug,
such as acetone, hydrochloric acid, sulfuric acid, ammonia and others of common use,
such as cement and aviation gasoline.
Within the framework of the Plan above mentioned, the fight against illicit drug problem
has been tackled in a holistic way, comprising all the aspects involved in the production,
trafficking, consumption and related crimes. It also recognizes that the ongoing efforts of
- 15 -
the Andean countries, through their respective national programs to combat illicit drugs
and related crimes, may be significantly boosted and complemented through joint action.
It is important to mention that, in developing of what has been set within the Plan, the
Andean Community has a community standard for the Control of Chemical Substances
used in the illicit manufacture of narcotic drugs and psychotropic substances (Decision
602 adopted in 2004), which seeks to contribute to the common purpose of protecting
and shielding the Community customs territory against the possibility of diversion of
imports or exports of certain chemicals into the illicit manufacture of narcotic drugs and
psychotropic substances, particularly cocaine and heroin.
Additionally, there is Decision 614 (2005) "Andean Strategy for Comprehensive and
Sustainable Alternative Development" which has as specific objectives: to strengthen the
full implementation of national development strategies and particularly the poverty
reduction policy; prevent the increase of illicit crops, prevent crop migration (balloon
effect); mitigate the impact on coca growing areas and their areas of influence, preserve
and exploit natural resources sustainably, promote greater Government involvement,
and reaffirm the shared responsibility criterion.
Over several years of individual and collective struggle against the global problem of
illicit drugs, the Andean countries have understood and sought to confront, the effects
and bonds of this phenomenon to global issues that affect cross-border and hemispheric
security. Thus, other instruments have been developing in parallel and complementarily
to the measures already outlined, such as Decision 552 (2003), which establishes the
"Andean Plan to Prevent, Fight and Eradicate Illicit Trade in Small Arms and Light
Weapons" in all its aspects, which aims to implement and support a comprehensive
strategy in this matter, considering the existing bonds between illicit trafficking and
proliferation of such weapons and security, terrorism, corruption and the global problem
of drugs, as long-term goal of achieving peace, stability and development in the
subregion.
In line with this, Decision 587 was adopted in 2004, "Guidelines for the Common
External Security Policy of the Andean Community" of which goals are to prevent, fight
and eradicate the new security threats, through cooperation and coordination of actions
directed to face the challenges these threats represent to the Andean Community.
There is also Decision 668 (2007) "Andean Plan of Fight agains Corruption", directed to
the establishment of policies, strategies, goals and mechanisms to increase the
efficiency and effectiveness in the fight against corruption, through cooperative action,
Community rules and common strategies that contribute to the eradication of practices
and acts of corruption at the communitarian level, through prevention, investigation,
disciplinary measures and asset recovery.
On issues related to "Cooperation and Mutual Assistance between Customs
Administrations of Member Countries of the Andean Community" (Decision 728 adopted
in 2009), development activities and new actions to implement, are intended among
others, to combat criminal acts, such as the smuggling of prohibited goods (of which
there are dangerous products, drugs, weapons, etc.) that may endanger the security of
countries, through measures, which using risk management mechanisms, make more
effective customs control, without need to interfere or create unnecessary delays in
customs clearance of free circulation. As for the fight against terrorism, is important to
acknowledge that all Member Countries are implementing individual and bilateral actions
on the matter and have ratified the “Inter-American Convention against Terrorism".
The legal instruments already mentioned, have set a foundation for the development of
institutional capacities at the Andean countries and at communitarian level in the fight
- 16 -
against the phenomenon of illicit drugs; they are as well, a complementary instrument of
mechanisms which like the ATPDEA and international cooperation, seek to create better
social and economic conditions in the countries of the Andean region, which ensure
alternatives to illicit narcotics production and not undermine the stability and security of
the governments in the region.
Some of the economic impact of the ATPDEA on the Andean economies have already
mentioned. It is worth reviewing now, the multiplier effects of its use on the small
producers and unions, due to cooperation that individually Andean countries have
received, for example, through programs developed by the United States.
Many of the projects that have been implemented with U.S. cooperation in the Andean
countries to support the fight against drug trafficking, incorporate tools that benefit both
Andean producers and consumers in the United States. One example is the requirement
of compliance with the rules of the International Fair-trade Labeling Organization (FLO)
related to fair wages payment from employers, guaranteeing the right to join a union and
the obligation to provide adequate housing for their employees.
The implementation of the ACCESO program (by its acronym in Spanish; Opportunity to
Support Cocoa Export Andean countries) was also important, which ended a few years
ago, and was designed to create partnerships between private industry in the United
States, international organizations for promoting development and the governments of
Bolivia, Colombia, Ecuador and Peru, which promoted sustainable cocoa production
under international standards, ensuring markets for small farmers, through future
purchases by the chocolate industry. This could further be boosted taking under
consideration the lessons learned and correcting its possible mistakes.
As well, the support regarding to compliance with certain standards and certification in
the management of forests, which are used to produce timber and other kinds of wood
that are managed in an environmentally responsible way. The inspection and monitoring
process at the producers' farms ensure the final consumer the highest quality and
compliance with environmental regulations.
It is also noted that Member Countries, with the trade openness support and technical
cooperation have been developing internal partnerships to market agricultural products
and agribusiness. Bolivia has associations such as ABAPI, that groups 53 pineapple and
banana producers' associations; El Ceibo, which brings together 38 cocoa producers'
associations, whom also process chocolate and exportable cocoa products; PROASPA,
formed by 28 palm producers associations that process and export palm heart to
American and European markets; Bana Beni, property of 10 associations that produce
organic bananas for the domestic market and export.
In the case of Peru, good agribusiness have been developed to serve the export market,
among which canbe mentioned Oro Verde, which has 22 associations of producers of
premium coffee and fair trade certification to sell to the United States and Europe; Mayo,
company that produces and markets luxury chocolate for the domestic market and
export; Copaso, which gathers 10 associations of cotton producers sold in domestic
markets as input for textiles for export; ACOPAGRO that has 70 associations of
producers of organic cocoa and final products to the export market; and OLAMSA, palm
oil processing company, which gathers 500 producers.
For its part, Colombia has highly innovative models for marketing and business of
community based organizations, an example is FCC, organization that helps 700 coffee
producers who produce special and organic coffee at standards required by the
Colombian national marketing system; Ecolsierra Network, an organization of 19 groups
of producers, created to provide technical support in marketing to producers of cocoa,
- 17 -
honey and coffee, with a strong private sector support; Frutimacizo company whose
ownership is shared between the Government and farmers, who produce and sell tree
tomatoes to the largest shopping centers in the south of the country.
In the field of agribusiness, it is increasingly frequent to notice in the Andean countries a
variety of agro-export business, including products such as guajillo pepper, paprika and
pepper in different varieties, as well as artichokes, onions, corn and asparagus. In
addition, there are other examples such as sugar cane, on the basis of which sugar and
ethanol are produced, and electricity cogeneration from its residue. It is also observed
the growth of palm oil related activities that culminate in the production of biofuels.
The social impacts of the initiatives already outlined are significant and illustrate the
scope of alternative projects to the illicit production of drugs as well as possible
mechanisms for the integration of small producers into domestic supply chains and
export. The side effect, in terms of poverty reduction, or governance, should not be
underestimated when evaluating the impact of measures such as the ATPDEA and the
achievement of underlying objectives: the eradication of illegal crops.
The information presented by various reports and literature on the fight against drugs
shows, in general terms, that in recent years the Member Countries of the Andean
Community and beneficiaries of the ATPDEA, have made significant progress in
reducing coca leaf plantations, showing a tendency to decrease the coca leaf cultivation,
(according to reports from the United Nations, it has reduced from 221.000 hectares in
2000 to 158.000 in 2009).
This trend, among others, reflects the effort to eradicate the cultivation of coca leaf,
using different formulas (concerted eradication and sometimes compulsive) consistent
with the policies defined by each country and under specific circumstances (presence of
maceration pools, social commitment, legal prohibition, etc.) However, the concern
remains about the responsiveness of those in this illegal business. Today, the vast
resources they manage and the complicity of poverty in rural areas of the Andean
countries, have led to join the "balloon effect", reflecting the migration of cultures
between countries, the so-called "Mercury effect" manifested in the fragmentation of the
growing areas within the producing countries. as indicated by the latest report from the
United Nations Office on Drugs and Crime, which makes it difficult for States to restrain
the illicit crop or surplus.
However, the Andean countries are concerned about the fact that there would not have
been a decrease in cocaine production at the same pace as in the reduction of cultivated
areas. The facts show that in recent years, the use of fertilizers and pesticides and
improved production technology have increased crop yields, which is why cocaine
production has remained largely stable. This result suggests reflection and suggest to
remain vigilant and to maintain the collective effort in the fight against drug trafficking as
a global problem.
- 18 -
Andean Community: Coca Crops
(Hectares)
The CAN Member Countries have repeatedly stressed their commitment to maintain
close coordination with each other, with special emphasis on the need for concerting
and multilaterally evaluate policies to confront the scourge of illicit drugs. Besides
reaffirming its commitment to protect their people and the hemisphere of the devastating
actions of terrorist organizations and transnational criminals. Examples are the actions
taken by the Andean countries to promote the speedy extradition of members of drug
cartels, to the United States in particular.
Also, the CAN concurs with the U.S. Assistant Secretary for Western Hemisphere Affairs
statement, Mr. Arturo Valenzuela, during his visit to Lima in April 2010, at which time
said his country aims to create an Andean strategy in the fight against drug trafficking,
fully covering the eradication, ensuring there’s no trafficking (drug) and that may have
indeed a clear answer to the question of demand.
The Andean countries are clear about the need to "recalibrate and redo cooperation"
and the new aspects and implications of the drug phenomenon to be recognized. It has
been valued positively, the fact that the United States conceived the use of drugs as
public health problem, rather than seeing it as a single criminal matter, also had agreed
on the importance of giving priority to social and economic development, and
strengthening the institutions, justice and respect for human rights.
In the search for a balanced response to the effects of drug trafficking, the Andean
countries have been advancing complementary initiatives to the single crop eradication.
Is emphasized, the cooperation in the fight to stop the trafficking of chemical precursors
used to produce drugs, and measures that seek to curb the illegal flow of arms and
money laundering.
It is a relevant statement the one made in last April by Mr. Robert Gates, Secretary of
Defense of the United States, concerning the symbiotic relationship between terrorists
and the insurgents and drug traffickers, until something more effective to reduce the
demand in his country, the struggle must be continuous and requires regional
cooperation.
The issue of hemispheric security is also concern of the CAN. In such sense it is
important to highlight the various agreements signed between the Ministers of Defense
and partnerships between police forces in order to expand cooperation in areas such as
combating transnational organized crime, referring to terrorism, drug trafficking, money
laundering, weapons trafficking and related crimes.
- 19 -
Finally, it is important to acknowledge that while much progress has been made in the
last decade in the CAN, the successes are "totally reversible." If friendly countries and
multilateral organizations do not continue supporting the fight against drugs in the
Andean countries, there is a risk that the effort may diminish or disappear.
IV.
CONCLUSIONS
The evolution of the Andean economies and the dynamic behavior of the export sector
during the period of use of the Andean Trade Preference and Drug Eradication Act
(ATPA / ATPDEA), revealed that they have had positive effects that in most cases, have
become stable: employment generation, expansion of integration production chains,
diversification in the export supply.
As long as the effects may be dissimilar among beneficiary countries, it seems clear that
the effective achievement of the goals inherent in the ATPA, also responds to the
particular evolutionary process of the Andean economies and to individual and collective
direct responses to the phenomenon of drug trafficking.
From this it is that while for Peru, for example, the use of preferences allowed it to
develop a commercial export base, which now benefits from bilateral trade agreement
with the United States, for smaller economies, such as Ecuador, the latent risk of having
no preferences, could mean a backward step in terms of the progress made on
employment generation and poverty reduction, among others, as it is already happening
to Bolivia, to whom the United States suspended the benefit of the ATPA / ATPDEA.
It is internationally recognized, a positive trend in reducing illicit crop areas during the
period in which the preferences have been used in the region, however, it must be noted
that to the extent that cocaine production has not decreased in equal proportion,
maintaining access tools to priority export markets for the countries of the region, still is
a valid tool in the fight against the global problem of illicit drugs and the fight against
drug trafficking.
Clearly, the ATPDEA is an instrument that gives the recipient countries, the chance to
produce value-added goods that enable them to sustain and expand its participation in
international markets and simultaneously raise the standard of living of the people
involved while also creating the possibility that, gradually, positive effects will occur in
some U.S. consumer markets, particularly agricultural goods and agro-industrial origin
goods.
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****